It seems that almost every week a member of Congress, the director of the Consumer Financial Protection Bureau or the acting comptroller of the currency has something negative to say about the banking industry. Where do they get the data to support their criticism?
Recently, CFPB Director Rohit Chopra, during an online discussion with The Washington Post, indicated he would focus on “junk fees.” In addition, he stated: “Banking is a bastion of many of these fees.” He also mentioned overdraft fees.
The most recent semiannual report to Congress from the CFPB, Chopra’s own agency, was issued last spring, and covered the period from April 1, 2020, to March 31, 2021. This report states that during this 12-month period, the CFPB received 646,200 consumer complaints.
These complaints were classified into 13 major categories, the largest of which were credit or consumer reporting, with 63% of the total complaints, and debt collection, with 14%.
The checking and saving issues, where complaints about overdrafts would be found, represented only 5% of the total complaints.
When you review the Consumer Response Annual Report issued by the CFPB for the period Jan.1 to Dec. 31, 2020, there are six pages detailing the types of complaints in the category of checking and savings issues.
Approximately 30,000 complaints were classified as checking and savings issues by the CFPB. Of these 30,000 complaints, 79% concerned checking accounts. Of those, 83% were categorized as “managing an account,” a subcategory including “issues concerning depositing and withdrawing funds, using ATM cards and funds availability.”
There was not one word in this entire six-page section that indicated complaints were received by the CFPB concerning overdraft programs or overdraft fees.
This raises the question of why the OCC and CFPB are apparently spending time talking about and working on the issue of overdrafts and overdraft programs when these no longer appear to be significant issues for consumers.
On Dec. 10, 2021, acting Comptroller Michael J. Hsu gave a speech titled “Reforming Overdraft Programs to Empower and Promote Financial Health.”
In Mr. Hsu’s speech he stated, “Nearly 20% of those frequent overdraft users identified in the CFPB [2017] study did not have a credit score.” How was this information collected? It is not a routine policy for banks to collect the credit score data on their deposit customers.
Mr. Hsu also stated, “A 2016 Pew Charitable Trusts survey found that the consumers who most frequently paid overdraft fees tended to have lower incomes than the U.S. population as a whole.” How was this information collected? It is not a routine policy for banks to collect income data on their deposit customers.
It has been said that the U.S. banking system is the most regulated industry in the world. Does a bank have a right to make a profit? I hope the answer is yes.
If a bank offers desirable products, provides good customer service, has honest and capable management and follows banking regulations, then in a free-market system, consumers and businesses should determine where they want to do their banking.
Banks have made many consumer-positive changes over the past 10-plus years in the manner in which they handle overdrafts and other fees. Some of these changes have hurt banks’ profits, but the changes were the right thing to do for consumers.
As someone who has worked as a consultant to banks for over 35 years, I think it is very rare for banks to charge anything that could be categorized as junk fees. Regulations cover many types of fees and the disclosure of these fees. In addition, bank examiners check compliance with these regulations.
Based on the CFPB’s own complaint data collection, it is time for Congress and banking regulators to close the book on overdraft fees, overdraft program regulations and whatever could be classified as junk fees and move on to more urgent consumer-related issues. In addition, Congress and banking regulators should be complimenting banks about the wonderful things they do for their customers and their communities.
I am very tired of everyone focusing on negative issues and want to talk and hear more about positive issues.
